Summary
granting motion to dismiss § 502 claim, and noting "Supreme Court's admonition that where adequate relief is available under another ERISA section, equitable relief under section 502 is inappropriate," and holding that "under Varity, there is no need for further equitable relief under section 502"
Summary of this case from Frommert v. ConkrightOpinion
00 Civ. 9543 (RWS)
July 19, 2001
BRUNE RICHARD, Attorney for Plaintiff, New York, N.Y. 10004 By: SUSAN E. BRUNE, ESQ. LAURIE EDELSTEIN, ESQ. Of Counsel
HOGAN HARTSON, Attorney for Defendants, New York, N.Y. 10017 By: DAVID DUNN, ESQ. Of Counsel
OPINION
Defendants, Computer Task Group, Incorporated ("CTG"), Computer Task Group, Incorporated Executive Supplemental Benefit Plan (the "SERP"), Computer Task Group, Incorporated Compensation Committee (the "Committee"), and George B. Betzel and R. Keith Elliot (the "Committee Members"), have moved to dismiss the Second Claim for Relief against defendants CTG, the Committee, and the Committee Members, pursuant to Fed.R.Civ.P. 21 and 12(b)(6), for misjoinder and failure to state a claim against those defendants upon which relief can be granted.
For the reasons stated, the motion is denied in part, because all defendants are properly joined. However, no cause of action for breach of fiduciary duty has been stated and dismissal is granted as to that claim. The claim is thereby limited to a denial of benefits claim under ERISA § 502(a)(1), 29 U.S.C. § 1132 (a)(1).
Parties and Prior Proceeding .
Plaintiff David N. Campbell ("Campbell") started working for CTG in 1968. From 1970 through 1979, he served as CTG's vice president of finance and operations. Campbell was president and chief operating officer from 1979 until 1984, at which time he became CTG's chairman and chief executive officer. Campbell remained as chairman and CEO until 1994.
CTG maintains an Executive Supplemental Benefit Plan (the "SERP") for certain employees, including those who hold the positions that David N. Campbell held.
This action was filed on December 15, 2000 as an action alleging anticipatory denial of benefits under the SERP and seeking affirmation of Campbell's rights to those benefits. The instant motion seeks to dismiss the claim as to all defendants other than the SERP as superfluous to the claim as governed by ERISA and to limit the claim to that arising as an improper denial of benefits claim under ERISA Section 502(a)(1). The motion was marked fully submitted on April 4, 2001.
Facts
The SERP is managed and administered according to its terms and the provisions of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001-1461 (1999). CTG is the named fiduciary of the SERP and the Defendant Committee is the named administrator of the SERP. The Committee Members are named as defendants in their official capacity. The SERP vests in the Committee and the Committee Members the right to construct and interpret the plan and to decide matters arising under or in connection with the plan's administration. At the date of his departure from CTG in 1994, Campbell was a member of the SERP and was eligible for retirement benefits which, consistent with the terms of the SERP, would commence on or near the time of Campbell's sixtieth birthday. Campbell will turn sixty as of November 4, 2001.
Following his departure from CTG and through 1999, Campbell held executive positions with Pacer USA and Bolt Baranek and Newman. Then, in 1999, Campbell became CEO of Xpedior, Inc. CTG notified Campbell that his position with Xpedior placed him in violation of provisions of the SERP, thereby disqualifying him from the right to receive SERP benefits that otherwise would have commenced late in 2001. Alleging that the anticipatory denial of SERP benefits to him was wrongful, Campbell brought this action seeking affirmation of his rights to those benefits. Campbell also seeks relief for breach of fiduciary duty associated with the denial of benefits to him under the SERP.
The dispute at issue involves interpretation of two documents, a non-competition agreement and the SERP itself, whereby Campbell agreed not to engage in activity competitive with those of CTG in exchange for specified payments and benefits inuring to him.
Conclusions of Law Applicable Legal Standard
On a Rule 12(b)(6) motion to dismiss, the factual allegations of the complaint are presumed to be true and all factual inferences must be drawn in the plaintiffs' favor and against the defendants. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989); Dwver v. Reman, 777 F.2d 825, 828-29 (2d Cir. 1985). Accordingly, the factual allegations set forth and considered herein are taken from Cole's complaint and do not constitute findings of fact by the Court. They are presumed to be true only for the purpose of deciding the present motion to dismiss.
Rule 12(b)(6) imposes a substantial burden upon the moving party. A court may not dismiss a complaint unless the movant demonstrates if "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations'" H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 249-50 (1989) (citation omitted); Hishon v. King Spalding, 467 U.S. 69, 73 (1984); Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
The Non-SERP Defendants Are Proper Defendants
Rule 21 of the Federal Rules of Civil Procedure provides in pertinent part:
Misjoinder of parties is not ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or of its own initiative at any stage of the action or on such terms as are just.
Although the federal Rules do not define misjoinder, the case law establishes that misjoinder occurs at a minimum when the plaintiff fails to satisfy the conditions for permissive joinder. See Glendora v. Malone, 917 F. Supp. 224, 227 (S.D.N.Y. 1996); 7 Charles A. Wright, Arthur R.Miller Mary Kay Kane, Federal Practice and Procedure § 1683 at 475 (2001).
The defendants do not dispute that the plaintiff has satisfied the conditions for permissive joinder. They contend, however, that all defendants except the SERP are misjoined because they are non-liable parties whose presence needlessly convolutes the dispute between Campbell and the SERP. See. e.q., Committee for Pub. Educ. Religious Liberty v. Rockefeller, 322 F. Supp. 678, 685-686 (S.D.N.Y. 1971) (recognizing that while the state governor could be a proper party to the plaintiff's action, his dismissal was appropriate because full relief could be obtained against the other named defendants); Charles Alan Wright, et al., 7 Federal Practice and Procedure § 1683 (3d ed. 2001) (misjoinder is frequently declared because no relief is demanded from one or more of the parties joined as defendants).
Defendants correctly point out that "ERISA permits suits to recover benefits only against the plan as an entity." See Greater Blouse, Skirt Undergarment Assoc. v. Morris, No. 93 Civ. 1257, 1996 WL 325595, at *4; Leonelli v. Pennwalt Corp., 887 F.2d 1195, 1199 (2d Cir. 1989); Gelardi v. Pertec Computer Corp., 761 F.2d 1323, 1324-25 (9th Cir. 1985). Furthermore, the Second Circuit has noted that "[i]n a recovery of benefits claim, only the plan and the administrators and trustees of the plan in their capacity as such may be held liable." Leonelli v. Pennwalt Corp., 887 F.2d 1195, 1199 (1989). None of the defendants are named in their individual capacity. They are named in their official capacity and the relief sought against them is declaratory and injunctive relief concerning the denial of benefits under the SERP.
Although it is not clear that an injunction requiring payment of plan benefits must be directed against persons rather than the plan itself, (see Hall v. Lhaco, 140 F.3d 1190, 1996 (8th Cir. 1998) (containing language to that effect at 1196, but also indicating that an effective injunction could be had against the plan or the plan administrator at 1197), it is not inappropriate to do so.
The defendants contend that compelling all SERP agents to respond as distinct defendants inundates the court with multiple copies of substantially identical documents and increases the cost of litigating SERP-related disputes. This may be true. However, while the court has discretion to drop or add parties "on such terms as are just" (Fed.R.Civ.P. 21), no injustice is done in having the named defendants respond in their official capacities to allegations that they wrongfully terminated benefits.
The Claim for Breach of Fiduciary Duty is Dismissed
Campbell also makes a claim of breach of fiduciary duty against all defendants. Campbell contends the claim arises not under § 502(a)(2) of ERISA, 29 U.S.C. § 1132 (a)(2), which provides for actions asserting claims arising under ERISA's substantive statutory fiduciary responsibility provisions, but under the terms of the SERP itself and the federal common law governing pensions. However, the common law developed from interpreting the terms of ERISA does not override the express dictates of the statute.
The parties agree that the SERP, which was created to provide benefits to a select group of management an highly compensated employees of CTG, is a "top hat" plan that is excluded from ERISA's substantive statutory fiduciary responsibility requirements. See Galhone v. Flaherty, 70 F.3d 724, 727 (2d Cir. 1995); see also 29 U.S.C. § 1101 (a)(1)
ERISA sections 201, 301, and 401 exempt from ERISA's vesting funding and fiduciary responsibility provisions any plan "which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. " 29 U.S.C. § 1051 (2), 1081(a) (3), 1101(a)(1). Known as "top hat" plans, these plans are "excluded from ERISA's vesting, funding and fiduciary responsibility requirements because Congress deemed top-level management, unlike most employees, to be capable of protecting their own pension expectations." Galhone v. Flaherty, 70 F.3d 724, 727 (2d Cir. 1995). The SERP is unfunded, and its stated purpose is "to provide specified benefits to a select group of management and highly-compensated Employees."
Courts have an obligation to develop and apply federal common law to interpret ERISA and fill its interstices. See Chemunq Canal Trust Co. v. Sovran Bank/ Maryland, 939 F.2d 12, 16 (2d Cir. 1991) (citing Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989),cert. denied, 505 U.S. 1212 (1992). However, the principles that inform the creation of such common law do not license the recognition of new legal obligations contrary to express statutory provisions.
Campbell contends that ERISA common law imposes a fiduciary duty on the administration of top hat plans like the SERP, despite the express statutory provision to the contrary. However, Campbell has not produced any case that creates fiduciary duties distinct and in addition to those created by statute. All of the cases cited interpret or clarify the duties and fiduciary responsibilities found in the statute. See Varity Corp. v. Howe, 516 U.S. 489, 497 (1996) ("[T]rust law will offer only a starting point, after which courts must go on to ask whether, or to what extent, the language of the statute, its structure, or its purposes require departing from common-law trust requirements.") ("Varity"); see also Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989); New York State Teamsters Conference Pension and Retirement Fund v. Boening Brothers, Inc., 92 F.3d 127, 130-133 (2d Cir. 1996) (holding that in determining the scope of fiduciary duties and obligations under a plan, courts look to principles of traditional trust law.)
Congress has considered and exempted plan management from the fiduciary provisions of ERISA when a "top hat" plan is at issue, and a judicial gloss on those provisions cannot create what Congress has precluded.
Campbell next contends that even if the statute does not give rise to fiduciary duties for "top hat" plans, the plan itself creates such duties. See Wise v. El Paso Natural Gas Co., 986 F.2d 929, 937 (5th Cir.) (through the terms of a plan an employer can impose upon itself enforceable extra-ERISA obligations), cert. denied, 510 U.S. 870 (1993); see also In re White Farm Equipment Co., 788 F.2d 1186, 1193 (6th Cir. 1986). Here, the SERP names CTG as the plan fiduciary, and the Committee and its Members as the plan's administrators and managers. The SERP also vests in the Committee and the Committee Members the right to construct and interpret the plan and to decide matters arising under or in connection with the plan's administration.
However, as noted by the Fifth Circuit in Wise v. El Paso Natural Gas Co., "[s]uch extra-ERISA commitments must be found in the plan documents and must be stated in clear and express language." 986 F.2d 929, at 937. New York contract principles, which govern construction of the SERP, also demand such express clarity. See e.q., ADT Operations, Inc. v. Chase Manhattan Bank, 663 N.Y.S.2d 190, 192 (N.Y. Co. Sup.Ct. 1997).
The discretion allocated to the SERP administrators to interpret and determine benefits claims does not, ipso facto, create any separate fiduciary obligation. The SERP cannot administer itself. The SERP must therefore authorize at least one agent-either the fiduciary or the administrator-to determine benefit eligibility according to its terms. To argue that the mere existence of such discretionary authority creates a fiduciary duty renders the statutory exemption of "top hat" plans meaningless. Because every plan must be administered and every benefit claim determined, the exemption would never apply.
Moreover, the use of the word "fiduciary", or other words which create symmetry between the SERP's coverage and similar coverage under non-exempted ERISA plans, cannot alone establish fiduciary duties on the part of the named person or entity. The Third Circuit has addressed this argument and rejected it, finding "no merit in this contention". Barrowclough v. Kidder Peabody Co., Inc., 752 F.2d 923, 934-935 (3d Cir. 1985), overruled on unrelated grounds, Pritzker v. Merrill Lynch, Pierce, Fenner Smith, Inc., 7 F.3d 1110 (3d Cir. 1993). Like the top hat plan in Barrowclough, the SERP uses the term fiduciary, and other vernacular of ERISA, merely to put the plan participants on notice as to who performs which roles traditionally associated with administration of ERISA-governed benefit plans.
Campbell has failed to identify a source of fiduciary duty within the four corners of the SERP that would require the defendants to justify their actions according to fiduciary standards. The exemption of "top hat" plans from the fiduciary obligations of ERISA, and the lack of express language in the SERP plan itself creating such fiduciary obligations, leads to the conclusion that no such obligations exist in this case.
Moreover, "where Congress elsewhere provided adequate relief for a beneficiary's injury, there will likely be no need for further equitable relief [under section 502(a)(3)], in which case such relief normally would not be appropriate". Varity Core. v. Howe, 516 U.S. 489, 515 (internal quotations omitted.) Relying on Parente v. Bell Atlantic-Pennsylvania, No. 99 Civ. 5478, 2000 WL 419981, at *3 (E.D.Pa.Apr.18, 2000), Campbell contends that under Varity "a plaintiff is only precluded from seeking equitable relief under § 1132(a)(3) [section 502(a)(3)] when a court determines that plaintiff will certainly receive or actually receives adequate relief for her injuries under § 1132(a)(1)(B) [section 502(a)(1) (B)] or some other ERISA section." Id. at *3 However, in that case, the court noted its disagreement with other district courts within the Third Circuit. See, Smith v. Thomas Jefferson Univ., 52 F. Supp.2d 495, 489, n. 4 (E.D.Pa. 1999) (observing that if plaintiff were to proceed under § 1132(a)(1)(B), plaintiff's claim under § 1132(a)(3) would have to be dismissed); Reilly v. Keystone Health Plan East. Inc., No. 98-1648, 1998 U.S.Dist. LEXIS 11337, at *4 (E.D.Pa. July 27, 1998) (dismissing claim under subsection § 1132(a)(3) because plaintiffs also sought remedy under subsection § 1132(a)(1)(B)); Feret v. CoreStates Fin. Corp., No. 97-6759, 1998 U.S.Dist. LEXIS 11512, at *16 (E.D.Pa. July 27, 1998) (same); Smith v. Prudential Health Care Plan, Inc., No. 97-891, 1997 U.S.Dist. LEXIS 18991, at *2 (E.D.Pa. Nov. 25, 1997) (same); Kuestner v. Health Welfare Fund Pension Fund of the Phila. Bakery Employers Food Driver Salesman's Union Local No. 463, 972 F. Supp. 905, 910-11 (E.D.Pa. 1997) (same).
The issue has not been explicitly confronted in this Circuit, except in an unpublished opinion which concurred with the principle that claims under the two sections are mutually exclusive. Borowski v. International Bus. Machs., Inc., No. 98-7175, 165 F.3d 13, 1998 WL 777457, at *2 (2d Cir. 1998) ("[W]hen an ERISA fiduciary duty claim seeks to recover the same relief requested by a denial-of-benefits claim, the fiduciary claim is precluded.")
This case does not require a determination that claims under ERISA section 502(a)(1) always preclude a claim under section 502(a) (3). Under Varity, the analysis required is simply whether an "adequate remedy" is available 502(a)(1) and therefore, additional equitable relief under section 502(a)(3) is "inappropriate." The only claim for which there is a controversy is the claim to clarify Campbell's right to future benefits he may be entitled to begin receiving in November of 2001. He has no other claim, such as for lost interest, until November, 50 no other claim is ripe. The holding in Parente v. Bell Atlantic-Pennsylvania, No. 99 Civ. 5478, 2000 WL 419981, at *3 (E.D.Pa. Apr.18, 2000), that a court must determine that plaintiff will certainly receive or actually receives adequate relief for her injuries under section 502(a)(1) before a claim under 502(a)(3) may be precluded, sets too high a bar under Varity and does not adequately account for the Supreme Court's admonition that where adequate relief is available under another ERISA section, equitable relief under section 502(a)(3) is inappropriate. Consequently, under Varity, there is no need for further equitable relief under section 502(a)(3) and such relief is therefore not appropriate.
Conclusions
For the stated reasons, dismissal is denied insofar as the complaint names CTG, the Committee, and the Committee Members in addition to the SERP. As to the claim for breach of fiduciary duty, dismissal is granted, limiting the claim to one arising as an improper denial of benefits under ERISA Section 502(a)(1).
It is so ordered.